Wednesday

24th May 2017

Russia relaxes EU food ban, counts costs

  • (Photo: malyousif)

Russia has said its ban on EU food imports will cost it “hundreds of billions of rubles” in subsidies.

Its agriculture minister, Nikolai Fyodorov, told the Rossiya 24 broadcaster on Wednesday (20 August) the government has set aside 50 billion rubles (€1.03bn) for this year to keep shop shelves stocked with EU-type products.

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"We are trying to prove that it [the 50bn ruble subsidy] needs to be somewhat higher," he noted.

“The volume of additional support needed to substitute for the embargoed items in full – if we are talking about short-term, through the end of the year – is tens of billions of rubles”.

“But there are also medium-term measures: Next year and in the subsequent years, you could say that this sum will be measured in the hundreds of billions of rubles”.

Russia imposed the ban on selected EU food items on 6 August in retaliation for EU sanctions over the Ukraine conflict.

Also on Wednesday, its prime minister, Dmitry Medvedev, took a long list of products off the blacklist.

The decision, published by Russia's food authority, Rosselkhoznadzor, includes: trout and salmon hatchlings; potato and onion seeds; hybrid sugar maize and peas for planting; lactose-free dairy products; selected vitamins and flavour additives; protein concentrates; and selected food fibers and food additives.

The same day, its consumer protection agency, Rospotrebnadzor, in a highly publicised move, ordered McDonalds to close four restaurants over unspecificed food safety violations.

Both sides are currently counting the cost of the sanctions confrontation.

The European Commission has so far earmarked €155 million to help EU farmers keep prices stable.

Its spokesman, Roger Waite, told EUobserver the full cost of the Russia ban is likely to be “massively under €5 billion”. But a Belenux-based bank, ING, has estimated it will cost €6.7 billion and 130,000 jobs.

With the EU and US also targeting Russian banks and energy firms with a ban on long-term debt, the overall Russian cost is likely to be higher still.

Russia's Vedomosti newspaper last week reported that Rosneft, the country's top oil producer, has asked the government to buy 1.5 trillion rubles (€30bn) of its bonds so that it can make debt repayments.

On the food side, World Bank data says Russia is the seventh largest country in terms of arable land per capita.

The data also says its livestock production is growing, but there is a steep downward trend in crop output and an ever steeper trend in rural depopulation.

For his part, Dmitry Yuriev, Russia’s deputy agriculture minister, told the FT this week that new programmes to develop logistics and quality-control systems in reaction to the EU food ban will take several years to implement.

Citing a lack of refrigerated storage facilities, he said: “Up to half of the fruit production from small farms and 20 percent of industrial vegetable production [in Russia] just rots away".

Analysis

Can Europe afford a Russia trade war?

One trade expert has described the EU-Russia sanctions war as economic “mutually assured destruction”, but strategic considerations continue to trump financial problems for both sides.

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